An Opec plan to agree a cut in oil output ended in failure after Russia balked at plans for the deepest cuts since financial crisis.
Photograph: Leonhard Föger/Reuters

Global oil prices tumbled to lows not seen since mid-2017 on Friday after the Opec oil cartel failed to strike a deal to steady the market against the impact of the coronavirus by reining in production.

The collapse of talks between the world’s largest oil producing nations has stoked investor fears that the coronavirus could trigger the most severe oil market shock in history by throttling demand from heavy industry and airlines.

The benchmark price of oil plummeted by over 7% to $46.31 a barrel due to economic fears ignited by the coronavirus, the lowest price for Brent crude since July 2017.

Opec had planned to cut output by 1m barrels a day but was relying on Russia to lead cuts of 500,000 barrels a day in return.

A statement from the petro-nations said energy ministers would continue talks to stabilise the market, but stopped short of assurances that any production cuts would be put in place.

The Russian energy minister, Alexander Novak, told reporters that it meant members could now pump as much oil as they like from 1 April this year.

Bjørnar Tonhaugen, the head of oil markets at Rystad Energy, said the unexpected development “falls far below our worst-case scenario”. He warned that Opec’s failure would “create one of the most severe oil price crises in history” by “sending oil prices into a free-fall”.

The oil price has collapsed by a third this year. It reached almost $69 a barrel in January, before the virus outbreak, before plummeting to one-year lows around $50 a barrel last week and just over $46 on Friday.

Major oil traders warned that prices could tumble further if Opec fails to take action without Russia’s support, and predicted oil price lows below $45 a barrel for the first time since the market began to recover from the last price crash in 2016.

Opec’s own analysis predicts that the economic impact of the coronavirus could halve the world’s forecasts for oil demand growth over the first half of this year, while traders including Goldman Sachs fear that the virus could cause demand to flatline for the whole year.

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The US banking giant has warned that oil prices are likely to average $45 a barrel in the first half of this year, even with a full Opec+ agreement to cut production by 1.5m barrels a day, because the restrictions do not go far enough to offset the impact of the virus on China’s economy.

China’s demand for oil and other raw materials collapsed in January after the outbreak forced some of its largest refineries and factories to close. The economic slowdown is expected to spread globally as companies and schools shut down, and restrictions limit international travel.

Ahead of the talks Jeff Currie, the head of global commodities research at Goldman Sachs, warned that “the damage is done”.

“The demand damage is happening today, right now. Cutting production by 1.5m barrels a day in April or May is not really going to save you in the current environment. That’s why I say it’s too little too late.”

• This article was amended on 7 March 2020 to correct a reigning/reining homophone.